Real estate contracts are a necessary part of any purchase or sale of a property, whether you’re buying or selling a house or apartment. They set expectations and duties for the parties involved, so that everyone’s legal rights are covered.
There are many different kinds of real estate contracts, all of which serve a similar purpose: to protect the interests of buyers and sellers. Here are some of the key areas that you should look out for in a real estate contract:
Representations and Warranties
Real estate agreements usually have representations and warranties made by the seller about the condition of the property. These include information about whether the seller has ever had loan delinquencies, litigation, or special assessments on the property. The seller’s representations and warranties may also include information about the status of the title to the property, such as a warranty deed.
Riders and Addendums
There may be additional details in a real estate contract, such as rules and regulations for the community where the property is located or any restrictions on the use of certain items that are located in the property. These riders and addendums should be clearly explained in the contract to ensure that both parties are aware of what’s expected of them before they sign.
Considerations
Another essential element of a real estate contract is considerations, which are any things of value that the buyer or seller will exchange for the property in question. Typically, this means money, but it can also mean a significant material item such as a boat.
Defaults
Real estate contracts generally state what happens if one party defaults on the contract. This sets clear expectations for both parties and prevents misunderstandings in the future.
Contingencies
In both residential and commercial contracts, contingencies are an important feature of the agreement. These often involve the ability of a buyer to terminate the agreement during inspection periods or during a period in which the buyer is allowed to obtain financing.
These terms can be confusing to people who aren’t in the industry, but they are important to remember if you’re interested in buying or selling a property. These contingencies can cover anything from acceptable zoning and economic analysis to pre-leasing and environmental inspections, so be sure to read all of the terms and conditions of your real estate contract carefully.
Power of Attorney
While power of attorney documents are not used exclusively in a real estate setting, they can be extremely helpful if the buyer or seller is out of the country, has a mental disability, or otherwise cannot physically sign the contract. In these situations, a power of attorney can be drafted and signed by someone else on the party’s behalf.
Closing Costs
Closing costs are additional fees that must be paid to transfer the ownership of the property to the buyer. These can include escrow fees, title search fees, title insurance, notary fees, recording fees, transfer tax, and more.
